The New New World Order

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It used to be that most of the world’s big political and economic questions could plausibly be framed as struggles pitting government against free enterprise. They were battles for the commanding heights. Choices between freedom and serfdom. (Insert metaphor of your choice here.)

This Manichaean view still resonates in political circles, particularly in the U.S., and even more particularly among Republicans on the campaign trail. For most other purposes, though, it feels pretty retro. The most important choices today aren’t between government and free enterprise; they’re between political and economic systems that work and those that don’t.

To a certain extent, this marks the victory of free enterprise—private property and profit are key elements of any conceivable solution to today’s problems. But they aren’t the only elements. Capitalism doesn’t bring widespread prosperity under all possible circumstances; it needs effective governance and institutions to deliver the goods.

Consider the euro. Yes, creating the European currency required government action, but many of its most eager advocates were free marketeers. And the euro’s current troubles are the fault of a design flaw, not of the governments or markets per se. Europe unified its money without unifying its economy, and that’s not sustainable. The architects of the euro hoped that the reality of the currency zone would force the political and economic changes needed to make it work. Which may still happen, but it will involve hard political choices.

The same goes for global economic governance. The triumph of free enterprise around the world since the end of World War II was not a fluke. It happened because the United States and its allies designed a system that encouraged it. The key institutions here were the International Monetary Fund, the World Bank, the General Agreement on Tariffs and Trade (now the World Trade Organization), and the grouping of political leaders known first as the G-7, then the G-8. This setup, however imperfect, has allowed nation after nation to rise to affluence over the past 60 years.

One key to this success has been that these institutions—unlike the relatively feckless United Nations—have reflected the real balance of global economic power. The U.S. was the dominant player, with Western Europe an important number two. But the very success of this arrangement is now undoing it. Economic growth outside the U.S. and Europe has shifted the balance, dispersing economic power around the globe.

There are different ways one can react to this. In The World America Made, which got a lot of attention early this year because President Obama praised an excerpt from it published in The New Republic, Brookings Institution senior fellow Robert Kagan simply denies the shift. Amid an otherwise cogent explanation of why American hegemony has been a good thing, he asserts that there’s no reason it shouldn’t continue, given that the U.S. share of the global economy hasn’t declined since 1969. But that’s by an adjusted measure (purchasing power parity) that doesn’t fully reflect economic clout. At market rates, as Edward Luce pointed out in a Financial Times critique, the U.S. share of global income dropped from 36% in 1969 to 23% in 2010.

Ian Bremmer, author of Every Nation for Itself, takes a different tack. He recounts how international arrangements have begun to reflect the new economic reality, most notably with the replacement of the G-8 by the G-20. Then he briskly describes how that’s likely to work, or not. “Getting 20 negotiators to agree on anything beyond a photo op and high-minded declarations of principle is difficult enough,” he writes. “It’s all but impossible when they don’t share basic political and economic values.” Bremmer is a political scientist who founded the forecasting firm Eurasia Group in 1998 on the hunch that investors and corporations would be paying closer attention to politics in the years to come. (Good guess!) What we’ve really got now, he argues, is not the G-20 but the G-Zero—a world where no one’s in charge. The likely result: a very unsettled decade (or longer) until a new order emerges.

In No One’s World, Charles Kupchan, a professor of international affairs at Georgetown University, starts in about the same place as Bremmer. But his ambition is higher: He’s trying to call a great historical turn, akin to the economic rise of the Western world that began in the Renaissance. “Deviations from the Western way represent not minor diversions along the one-way road to global homogeneity,” he writes, “but credible alternatives to the Western model of modernity.”

“If China is far too communitarian, the West, and the United States in particular, may have become too individualistic and socially balkanized.”

After a while it becomes clear that Kupchan is aiming at the same target a zillion other wonks have attacked over the past two decades: Francis Fukuyama’s “The End of History,” a famous 1989 essay in the journal The National Interest that later grew into the book The End of History and the Last Man. Fukuyama’s argument was not that interesting things were going to stop happening in the world but that political and economic progress had reached their logical ends with liberal, capitalist democracy (“liberal” meaning respecting individual rights, not left-wing). Communism had clearly been a wrong turn, and with its demise there was no credible long-run alternative to that Western model of modernity.

We may never know for sure if Fukuyama was right. But current challenges from China and political Islam surely aren’t enough to prove him wrong. The Communist Party’s legitimacy in China rests almost entirely on its ability to deliver rising living standards—which at some point will inevitably falter—while no state run along Islamist lines has achieved much economic success outside of selling oil.

A more significant ideological challenge, Fukuyama writes in a new article in Foreign Affairs (titled, natch, “The Future of History”), comes from the failure of liberal democracies, especially those in the U.S. and UK, to protect the economic interests of the group that makes liberal democracies possible: the middle class. “It is more the variety of capitalism that is at stake,” he writes. “The new ideology would not see markets as an end to themselves; instead, it would value global trade and investment to the extent that they contributed to a flourishing middle class.”

Sounds like a nice ideology. But it would require serious power behind it to triumph on a global scale. That’s what Kagan, another critic of Fukuyama’s end-of-history thesis, is really arguing. To ensure a democratic, middle-class global future, Kagan is convinced that America will have to maintain its political and economic dominance. But can it?

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